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Just looking at the macro numbers - net exports as a percentage of GDP, labor force participation as compared to best practice, I would say that the problem with the German economy is that the german worker is being paid.. somewhere  around 15 % too little. In real terms.

10% export surplus. Every year. That's insane - you cant keep on selling more stuff than you buy and get paid, it is a logical and accounting impossibility.

 Boosting consumption by ten percent would likely boost german output and labor force participation - and there is significant slack there - so demand has to grow by a good bit more than ten % to bring things back into balance.

 Since wage hikes that large probably would cause some inflation, in order to balance things, it would likely be necessary to hike wages 20 + % in nominal terms.

It bloody well has to be possible to sell this to the german people, if not the current german government. The problem with their economy isn't that they are living beyond their means, the problem is that they are living Vastly beneath their means.  

by Thomas on Thu Jun 5th, 2014 at 11:01:24 AM EST
Vastly below their potential means, at the very least.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2014 at 01:50:42 PM EST
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Wage increases are obviously immensely popular and Unions in Germany are doing their best. While I wrote about stagnating wages, in fact for the last two years wages have been growing at a healthy rate. But I fear it is still to slow to save the Euro. If we are optimistic and project an ongoing wage growth of 4%, we will still need 5 years to get to the 20% increase you estimated.

I believe what will happen is that the Eurozone will dip back into recession and unemployment will start to rise even in Germany. And then it is clear what will be the political answer: wage cuts to increase competitiveness.

by rz on Fri Jun 6th, 2014 at 03:33:25 AM EST
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German unions seem to suck, as German real wage increases in the last decade (and a half?) has been about zero percent.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Tue Jun 24th, 2014 at 11:06:00 PM EST
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